Is America losing its innovation edge? For decades, the country has debated this question in the halls of Washington, on the nightly news, and in corporate boardrooms. Pundits have looked abroad for signs—from the Soviets during the Cold War to the Japanese in the late 1980s to the Asian Tigers in the early 2000s—that the United States was losing its economic advantage. Pessimists point to startling statistics, such as the rise in the number of patents filed by foreign inventors or the growing corps of engineers graduating overseas.
These statistics are indeed alarming. Yet despite the historical challenges, the United States has remained the home of innovation. From the Internet to mainframe servers to pharmaceuticals, major innovations are still “Made in the USA.”
So what is the disconnect? Is America’s innovation advantage simply too large to overcome? Are numbers of patents and engineers no longer relevant metrics in a digital world? Perhaps. However, we think that looking solely at innovation and leadership in basic research is far too narrow. The key question is whether the United States has been losing its ability to translate innovation into economic leadership.
To answer this question, building on recent McKinsey Global Institute (MGI) research on productivity and on the role of US multinationals, we conducted a series of interviews with CEOs of advanced industrial companies. These CEOs, who lead R&D—and engineering-intensive companies ranging from automobile and energy-equipment manufacturers to aerospace and defense players, stand on the front lines of this debate. From our conversations and original research, we see real cause for alarm.